Market round-up: Carnival starts to sink as brokers persuade City it is full of holes

City analysts lined up to tell investors to abandon ship at Carnival today.

Analysts at Morgan Stanley, Exane BNP Paribas and Natixis all issued the equivalent of Sell ratings after the cruise-ship operator yesterday reported a 30% fall in its third-quarter profit and warned it could make a loss.

The group has underperformed since last year’s disaster when its cruise liner the Costa Concordia ran aground off the Tuscan coast claiming 32 lives. It has since had problems on two other ships and chairman Micky Arison said its Costa brand could take another three years to recover fully.

Shares tumbled 5.6% yesterday but lost another 7% today. Morgan Stanley’s scribblers said its early 2014 full-year earnings guidance “implies a sluggish yield recovery” as well as increased costs. They predicted a “major restructuring and/or cash return” is likely.

Punters agreed with the brokers’ advice and it sank 158p to 2099.5p.

Markets were broadly flat but a slightly brighter outlook in Europe after comments from German finance minister Wolfgang Schaeuble helped the FTSE 100 rise 12.13 to 6583.59.

Engineer Amec decided that after five years it was a good time for some broker housekeeping. It has ditched Deutsche Bank and replaced them with Barclays to join joint brokers Bank of America Merrill Lynch. Amec was unmoved at 1090.5p.

Analysts at UBS raised their price target for aerospace group BAE Systems to 490p today after new contract wins for the group yesterday and it was 11.2p up at 462.2p.

Over on the small-cap index, pub group Punch Taverns, which is still in talks to sort out its debt situation, reported a 23% full-year pre-tax profit slump to £49 million and dipped 0.5p to 13.9p.

Fashion and homewares retailer Laura Ashley disappointed investors with falling comparable sales and it lost 3.8p, or 14%, to 22.5p.

Over on AIM, iodine-maker Iofina jumped 28.8p to 174.9p after it reported record half-year sales.

Panmure Gordon’s analysts declared Animalcare — the group which sells medicines for pets — is a “mini Dechra at the start of journey”. Panmure likened the rabbit, cat and dog drugs group to the mid-tier listed Dechra Pharmaceuticals and started covering it with a Buy. They said it “allows investors access to large and fast-growing markets which are relatively predictable and without much economic cycle volatility.” It said the market is worth £565 million and Animalcare has a 1.3% market share at present. But investors have yet to heed Panmure’s advice and the pet specialist was unmoved at 172.5p.

PORTFOLIO

BUY

Close Brothers Group

Cor, you don’t get much keener than Canaccord Genuity on Close Brothers. “The outlook is simple,” it says before quoting the financial services group about how well placed it is. “We expect Close Brothers to show progress in its three divisions … (in fact, we expect forecasts to rise),” it adds. Get a room guys. Shares are about 1140p with a 1320p target.

SELL

Premier Foods

Panmure Gordon urges us to dump Premier — not because it is disconsolate at the departure of Mark Moran as finance chief (the broker calls replacement Alastair Murray a “safe pair of hands”) — but because “another significant rights issue is needed”. Shares are 148p with a 130p target.

HOLD

Lloyds Banking Group

Hang onto shares in Lloyds, Investec recommends, reckoning that the taxpayer-owned bank is going to “get by with a little help” from its friends. The broker has raised its target price from 65p to 76p for shares at present around 74p and says it has done so because the bank is the “key beneficiary” of the political backdrop.